2013-05-30 06:58 (UTC)
XE Market Analysis
The dollar continues to consolidates at easier levels following yesterday's correction, which came on month-end flows and the pullback in U.S. yields. USD-JPY's downturn towards 100.50 overnight should keep the dollar on the backfoot against EUR, GBP and the commodity bloc currencies, while another deep drop in the Nikkei 225 is likely to support the safe haven swissy. In earlier releases, U.K. house prices continue to show upward momentum, which has helped to underpin Cable, though more EUR-GBP month-end demand could absorb some of the flows. Swiss Q1 GDP came in much better than expected and tipped EUR-CHF from 1.2445 to 1.2420, where good support was noted. Movement today will be dependent on equity market developments and more potential price chop could go through from month-end activity.[EUR, USD]
EUR-USD ranges were fairly tight in Asia, though it managed to sustain higher levels amid yesterday's decent short covering rally. After starting the session at 1.2940 it moved over 1.2970 as the dollar came back under pressure amid USD-JPY selling. A surge in AUD also acted as a positive influence and it entered the European open on a firm footing. There is likely to be some supply from 1.2980 into 1.3000, but more month-end related demand for EUR and an extended correction in the USD could see stops come into play just above 1.3000.[USD, JPY]
USD-JPY ended the Asian session close to 101.00 after experiencing more whippy action. It started the session on the heavier side as the Nikkei came under pressure, which filled a rash of orders on the way to 100.60 after selling from 101.20 by funds and specs; and there was disappointment that MoF weekly data revealed net selling of foreign bonds and stocks. Heavy buying featured at the lows from importers, while offshore funds names saw value in establishing longs into support between 100.65 and 100.35. USD-JPY squeezed up to 101.50 in tandem with a small recovery in the Nikkei, but gains were unsustained as stocks weakened and intra-day accounts headed for safety into the close. USD-JPY is threatening to break key support on the downside after the Nikkei ended the session 4.7% lower and this will guide risk appetite in Europe.[GBP, USD]
Cable benefited from the dollar correction and headed to 1.5185 after the European open. The move higher also got positive momentum from more signs of U.K. house price growth, while EUR-GBP is consolidating around 0.8450 after it pulled back from the 0.8600 region on Wednesday. Good month-end demand went through the cross during Wednesday's European morning and there is potential for more residual interest to go through, which may cap the Cable upside.[USD, CHF]
CHF benefited from safe haven demand, which fueled a EUR-CHF drop from 1.2570 to 1.2440 lows on Wednesday. In early Europe it extended into the 1.2420 region on more safety plays and a much stronger than expected Swiss Q1 GDP reading. Good order flow is tipped in EUR-CHF into 1.2400, though price action ahead will be heavily linked to stock market moves, which have tipped EUR-CHF from over 1.2600 last week. There has also been a notable pick up in Swiss corporate hedging and another supportive factor for the CHF. Offers are likely from 1.2480 and 1.2500.[USD, CAD]
USD-CAD is trading close to 1.0350 after it eased back to the 1.0330 area by today's European open following yesterday's drop from 1.0375, which followed the BoC announcement, where rates were left unchanged at 1.00% as expected, and as the Bank retained its watered down tightening bias. The statement said 1.00% rates were "appropriate for a period of time", but added, an increase is likely required later. There had been speculation the BoC would remove the bias cleaning the slate for the new incoming governor. The dollar may find support on dips after the recent correction and with equities on the backfoot USD-CAD could retest higher levels. Offers are noted from 1.0400 and into 1.0420-30.